October | 2010 | Dave Stelzl's Blog

Archive for October, 2010

Oct

Justifying your Fee

Categories: Pizza, Sales Strategy and Value Proposition
Tags: discount, hardware, project fee, quoting price, rfp, rfq, roi calculator, selling customers, setting price, Technology, Trusted advisor

My son has never had pizza! Can you believe it…you should know by now that I eat pizza at least once a week, and that’s a bad week for me. Why have I deprived me son? Be cause he is allergic to everything. Gluten (which knocks out just about every restaurant bread), wheat, corn, dairy…that is, until yesterday.

After seeing numerous doctors, some local, some far away, we finally have the problem solved. The local doctors offered him cortisone to treat skin rashes which covered his body head to toe when he was an infant. My wife, believing the surface treatment was the wrong answer, began researching this. She soon discovered the food allergy problem, which is actually the result of your body not properly digesting a food, which leads to a toxic substance in the body rather than properly digested food, which in turn must come out of the body, generally in the form of a rash. Well, with a long list of allergy foods in hand, we were able to keep Tiny Tim (as I call him) somewhat free of rashes. The problem is, that means Tiny Tim can only eat a hand full of boring foods while watching the rest of us enjoy pizza and ice cream.

Then a couple of months ago someone refers us to a doctor just three hours from my house. Two visits, three weeks of treatment using natural products (no drugs), and he’s free to eat whatever. Of course Insurance doesn’t pay for this type of treatment…it’s all out of pocket. But do you think I questioned the fee? Did I send out RFQs, collect three bids, push the doc for a 30% discount, count his hours? No! He solved a serious problem using his intellectual capital. He earned the right to advise me, charge me, and convince me to call him the next time I have a medical need. This is the essence of becoming the trusted adviser. This is not a commodity.

PS. Tiny Tim and I are having pizza tonight!

Oct

The Discount Trap

By Dave Stelzl's Blog 2 Comments

Categories: Sales Strategy
Tags: car sales, channel partner, channel training, cisco discount, cisco margin, cisco mou, cisco rebate, cisco vip, co-op money, hp discount, jmf money, reseller, sales training, technology sale

Are these cars really on sale? Quick, let’s run down and get one…I remember the first car I bought off the lot. I was just graduating college and I told my father about a big sale they were having at a local dealer. He looked at me…I could see what he was thinking. “Didn’t I just pay to put you through college?”

How many people drive away from the car dealer feeling like they got a great deal? It never happens. Why? We don’t trust people that sell cars because the entire sales process appears to be dishonest. You drive up, there is always a sale going on with some silly inflated monkey in the parking lot, the sticker price is meaningless and the sale price is a deception. Between Edmunds and Kelley Blue Book, we now know that car dealer sales, their “invoice price”, and the margins they’ve claimed are all lies. There was margin in the mystery of car pricing, but that mystery has almost completely disappeared leaving dealerships with one of the worst reputations in sales. Even the line, “Preowned” is ridiculous.

Discounting is a trap. No one expects to pay list on Cisco or HP products, and most know what to expect in terms of street price. Well, you can’t really control the street price as a rep, but you can help position your firm as one of integrity by dealing with consulting prices properly. Here are some principles to consider when proposing project work:

1. As I wrote yesterday, fix price all services. T&M means “dollars per hour” and is a commodity business. Avoid this trap on high-end tech project work. (These prices should only be used in staff-aug work).

2. Price based on value. Don’t deliver prices until both parties know and agree on the value. In other words, don’t short cut the discovery process just because the client needs a quote now. If you’re wrong you lose.

3. Once the price is submitted, stick to it. If you quote $10,000 and then come back with $7000 for the same scope, you just lied. You said it would cost 10K but now you’ve changed your mind. It really costs 7K. Is 7K really it, or can I get you to cave some more? And what will happen next time you quote? Are you going to say, “This time I am giving you my final price?” Do you see how silly this sounds?

4. If the price is too high, one of two things happened. The value changed in the mind of the customer (or something else just trumped it), or you didn’t gain agreement with the true decision maker before quoting the price. This happens, so now what? You must change the scope! Either do it in phases, change the deliverable, change the person doing the work,…but change something. You can’t win by discounting…instead you become their car dealer’s peer.

5. If in the end they can’t afford you, leave them wishing they could afford you.

At times customers have said, I can get the same thing for 20% less from another firm. In the speaking industry I often hear, “We can get an event or “lunch and learn” speaker from the manufacturer for FREE!” But is it the same? Of course not….sell the value. “If you can get the same thing for free or 20% less, go for it! But you can’t and here’s why.” Then be ready with your value proposition. If it’s great, you will either win or leave them believing they have second best. Both should be seen as acceptable outcomes.

Oct

The Fixed Price Dilemma

By Dave Stelzl's Blog Leave a Comment

Categories: Sales Strategy and Wise Counsel
Tags: commission plan, margins, prices quotes, proposal writing, rfp, rfq, roi, roi calculator, sales pay plan, sales training, Technology, technology sales pay plan, var

After several posts on proposals and some words on pricing, people have responded with all sorts of reasons on why they can’t give a fixed price. Believe me, I understand the dilemma. If you just don’t know what it will take, you don’t want the risk…here are the common objections:

1. Client doesn’t want to pay more than the hours they see you onsite.

2. You always lose when you fix price

3. No one knows what it will take to complete the job

4. What about scope creep

and the list goes on – feel free to add some below and I will respond with my take…so what do we do? First let’s understand the real issues:

When you do T&M the client sees it as T&M with a cap. Even if you say, “there is no cap”, they expect one. If someone quotes me $500 to fix something in my house and sends me a bill for $2000, we are going to have a problem. Even if I pay it, it’s probably the last time I hire them.
When there’s a cap, I take all the risk. If we come in early, I make less just because I was efficient. In other words, I sold the $10,000 deal, got the approval, and perhaps a PO was issued for $10,000. And I’ve even forecasted it! But I only bill $7000, leaving 3K on the table. I just lost commission on 3K and my company lost the balance right off the bottom line.
On the other side, if I go over, the PO is issued, the people I am dealing with have put the funding together, it’s all signed off and ready to go, but three weeks later I am back in their office trying to get the PO increased. What do we do? Put everything on hold while we wait? That will go over well with my clients!
Or I decide to keep going with no further approval. Every dollar over is a loss in profit, and if my firm charges me a burden cost on services, which they should if they are smart, I really take a loss. Before I know it, there is no GP left in the deal and my commission in zero.

So why do people continue to justify the T&M approach? If you find you are losing on every deal, see if there is a trend. I had one client who was losing about 25% on every deal. Well, that was simple, start adding that amount to every new quote and you will be right on. If the price is too high, the T&M quote is too high – another issue solved. If the client only wants to pay for hours you can prove you spent, the deal was sold on price, not value, if you just don’t know, break it into phases and quote what can be quoted, estimate the rest for phase 2…stop quoting T&M prices!

Oct

Agreements are a Necessary Evil

By Dave Stelzl's Blog 1 Comment

Categories: Wise Counsel
Tags: binding agreement, boundary stones, legal agreement, proposals, reseller, sales, Technology, terms and conditions, var

Boundary stones have been used since the beginning of time as a way to identify property, whether private or when dealing with borders between countries and other local administrations. Made of stone and often marked by owners, they stand as a reminder of past purchases, conquered land, and other formal agreements. The old adage, “Remove not the ancient landmark” stands as a warning to those who would change the boundaries set up by constituents.

While most of us are not going to spend the money on lawsuits when dealing with smaller projects, formal agreements, like these boundary stones, must be put in place regardless company and deal size. They should be placed in easy to see (read) locations, and agreed to by all parties involved, as pictured in this ancient land marker above.

More clients are lost over poor communication on agreements than I will ever be able to count; usually with regard to scope or price. When deals are done without an agreement, two excuses are often raised:

1. The sales team fears putting it into writing, thinking it will slow down the sale or draw attention to elements of the agreement that may not sit well with management (on either side).

2. The client refuses to sign anything binding, usually because they don’t have the authority to do so, or don’t want to be locked into anything long term.

There may be other reasons, but these two pop up often, and as you can see, both spell trouble down the road. It is definitely faster and easier to agree on a hand-shake and get started, vs. draw up a formal agreement and getting a signature. But what happens after the project or service begins:

The client thought they were also getting ____________
The client expected the price to be _________

And notice, it is always in the client’s favor! I can’t remember too many clients coming back and saying, “Oh, I think we owe you another $10,000. We’ll send it over right away.”

So, if you’ve been reading the last several posts, proposals may be landfill, but agreements are boundary stones. Without them, there is no proof of what you’ve agreed to and the client is always right. Push the issue, and you are likely to be out of a client.

Oct

When to write the Proposal?

By Dave Stelzl's Blog Leave a Comment

Categories: Sales Strategy
Tags: hardware margins, quoting price, ROI Speadsheet calculator, sales negiation, sales training, software margins, Technology

When to write? That is always a great question. Some say you must be first, others say, “Last.” A wise mentor of mine told me long ago, “When they are ready to buy.” Of course it’s rare that you’ll actually know when they are ready to buy when competing for the business. But two things stand out in my mind as important factors:

1. You must have identified the people who actually make the decision.

2. You must have established the value of the deal with the buyer before presenting your price.

Your proposal should never be asked to sell the deal for you – it can’t. The sales person gets paid to sell the deal, then the document formalizes the agreement. If the buyer is asking for a proposal (usually it’s actually a custodian asking), and you have not completed both of the tasks above, you are just not ready to write. Submitting the proposal too early is destined to fail.

Instead, find ways to continue the sales process through discovery or demonstration that will allow you to further establish value and discuss the prices and budgets before writing. If the prospect is unwilling to work with you; not allowing you to take them through the proper steps, then consider yourself one of their possible vendors. What can you do to move up? It may not be on this deal, but I would pull out and continue to market your value for the next one. The last thing you need is another vendor-client relationship. Assume they’ll be looking for the best price from now on, stripping you of all value and margin.

Oct

Marc Benioff of Salesforce Supports the Security Message

By Dave Stelzl's Blog 1 Comment

Categories: Technology Trends
Tags: best crm, Cloud Computing, crm, marc benioff, operational efficiency, roi, salesforce.com, security, selling security, sfdc, tco, Value Proposition

Several companies ago, one of my employees, our security practice manager, made the comment, “Eventually everyone realizes that security is the place to focus.” He is right, just about everything hings on security when it comes to technology. You can have all kinds of ROI, operational efficiency gains, etc. But if it’s not secure, it doesn’t really offer any benefit to the corporation. Here is Marc Benioff, CEO of Salesforce.com reminding us that, security is a core part of the value proposition regardless of what technology you are selling.

Oct

Who are the Decision Makers?

By Dave Stelzl's Blog Leave a Comment

Categories: Sales Strategy
Tags: data compromise, decision makers, executive liability, forensic investigation, IT budget, IT spending, recent hacker news, security sales training, solution selling, technology products

I call decision makers, Asset Owners. They make decisions because they manage assets, and as asset managers or owners, they are liable. Some distinctions from yesterday’s post may help guide our thinking on the next sales opportunity:

1. Asset owners are building a business, IT is building an empire. Ask the IT person if they want to save money. Perhaps they’ll say yes. Then show them how you can replace their entire team with managed services and see what they say.

2. Asset owners are managing risk, IT is maintaining boxes.

3. Asset owners are held responsible for the security of their company’s secrets, IT can simply claim they are doing the best with what they have.

4. When an asset owner’s data is compromised, customer’s blame them, not IT.

5. If something really bad happens…the asset owner may be out of a million dollar job, their picture on the front page, and pending lawsuits. The IT person will have updated their resume with newly found security knowledge, tout actual forensics experience, and demand a 20% raise at the company across the street.

Oct

What IT Wants

By Dave Stelzl's Blog Leave a Comment

Categories: Sales Strategy
Tags: information security sales training, IT budget, IT spending, IT TCO, sales training, Technology Sales, technology spending, technology trends, Trends

What does IT want? A vacation… Here are ten other possible answers:

1. Higher pay

2. A better chair

3. A new laptop – probably a MacBook Pro

4. Add to it a new Ipad for personal use

5. Education – on technology, to improve the resume

6. Recognition

7. A promotion

8. Better stuff to oversee

9. Better stuff to oversee with

10. A new job that just is…better.

So why are we spending some much time negotiating prices, selling ROI, or talking about risk and liability? IT doesn’t really care.

Oct

Speak the C-Language

By Dave Stelzl's Blog 2 Comments

Categories: Value Proposition
Tags: books by david stelzl, channel development, Cybercrime, router security, Technology Sales, technology sales training, wallstreet journal, what would google do

In a coaching call I had yesterday I was asked,”How do we communicate more effectively with business owners and executives? We’re constantly being sent back down to IT.” This is a common question and one worth commenting on. Language has a lot to do with it…

(I know, it’s the second gun picture this month…and yes, I do have one of these) If I meet a fellow handgun enthusiast,but I’m dressed in business attire, neither one of us knows the other’s interest. If the topic comes up and I throw out some keywords such as Kel-tec 380, NRA, or double action/single action (and actually know what that means when speaking of handguns), that person immediately recognizes me as a peer in that particular area of interest. It allows us to build a relationship around that area, especially if that person senses I know more about it and might have insight into their next purchase. Notice this purchase is not something they will likely delegate to their spouse or children.

In the same way, when I meet an executive or business owner, if I am reading the same books, the same papers, and understand the pressures and factors involved in running a business or business unit, they will pick it up by the words I use and the sound bites I provide. The questions I ask will be different, and my approach to meeting their need will be in line with their business needs. If I demonstrate a particular understanding in areas of risk or security, related to their data, I earn the right to advise them on liability and protection. On the other hand, if I talk about the features and functions at the level they look to IT for, I sound like IT’s peer, or worse, less knowledgeable than their IT person, positioning myself as a possible vendor.

So what are you reading to be relevant to business leaders? I read The Wall Street Journal almost every day, I study the trends of cybercrime rather than the features of products, I know who is stealing, from who, and with what. I know who is losing, who is winning, and the names of the ring leaders. I don’t know how to set up router security (except in theory), and to be honest, I don’t care. Your comments on books that are hot right now would be helpful to readers of this blog, so feel free to comment here! To get us started, I found my recent reading of, What Would Google Do? to be thought provoking, business relevant, and interesting to those I speak with.

Oct

Long Proposals Make Great Landfill

By Dave Stelzl's Blog 4 Comments

Categories: Sales Strategy
Tags: business writing, contract liability, power point, proposal writing, sales proposals, sales training, signed contract, terms and conditions, verbal agreement, written contract

That’s right – Long Proposals Make Great Landfill…if you attended Friday’s teleseminar you’ll be receiving an audio copy of it shortly, but a few points for everyone are in order…

The Wall Street Journal reported just a few days ago, we are in the “texting” generation, and those writing proposals might take note here; people want it short and to the point. The days of writing lengthy documents to close a deal are long gone, and long documents are destined to be delegated downward to the lowest common denominator. But don’t expect that group to read it either. Some tips on keeping it short:

Cut out all company overview commentary. By the time they buy from you they will know who you are. Plus, it’s all online.
Don’t bother writing about your client either. Why an executive would need to read about their own company in your proposal is beyond me. If they don’t know what they do, you’re selling at the wrong level.
The more technical specifications you include, the more likely the reader will require IT personnel for interpretation. Instead, focus on bullets that outline the proposed benefits and leave it at that.
Your longest section should be your options. Make them easy to understand and building upon one another. Stop at three of four options, all stated at a high level.
Price based on milestone and avoid lengthy explanations on how your prices are computed. When asked, be ready with a concise answer.
And to really make this simple, avoid proposing until there is a verbal agreement. At that point your document becomes an agreement.
Make the signing page big and easy to read, but cut down on terms and conditions which may be pages too long. If you don’t plan on suing your client, you don’t need every detail covered. Limit your liability and cover your ability to fix things if not acceptable to the client.